What makes a small business successful? Is it hiring the best people who have a passion for what your business does? Is it having an in depth understanding of the problem that your business sets out to solve for its customers? Or is it making sure you have the best available tools to run and grow your business?
New research by Aberdeen Group has revealed that ERP systems are a key success factor for small businesses.
Why ERP Systems for SMBs Are the Chosen Mechanism for Successful Business Growth
The research revealed three significant factors around the role that ERP systems play in small business success:
- The most successful SMBs are more likely to be using an ERP to run their business operations.
- Out of those successful businesses, they are more likely to be using a cloud based ERP solution.
- They are more likely to be using their ERP in smarter ways and looking at emerging technologies.
The report, ERP for the SMB: Using Modern Technology as a Platform for Growth, is based on Aberdeen Group’s Business Management and ERP Benchmark Survey. The survey covered 135 small to medium businesses.
Aberdeen Group examined the differences between the SMB “leaders” – the top 35% based on performance; and the “followers” – the remaining 65%.
In this article, we highlight the key findings on how small business leaders are using ERP systems for to their advantage.
Successful SMBs Use ERPs to Empower Growth
ERP solutions give SMBs a powerful platform that helps them scale faster as they grow.
In fact, the most successful SMBs rely on their ERP solutions to support their growth: their ERP is embedded in how they run their business. Those who need to be agile and make fast decisions are relying on having instant access to real-time data.
SMB Leaders Manage Complexity Better with ERP Systems
The Aberdeen research reinforced what SMBs already know: business is becoming increasingly complex, and as your business grows, this complexity also grows exponentially.
The top challenge facing SMB leaders and followers alike is “managing growth expectations”. In other words, these businesses want to grow, but they find it difficult to manage the complexity that comes along with it: the proliferation of locations, products, processes, customers and competitors.
However, the top performing SMBs are simplifying this complexity by using an ERP system. Their ERP allows them to streamline processes, such as automating stock reordering based on pre-set minimums, or allowing customers to order online, see live stock availability and track their order progress.
SMB Leaders Use Cloud ERP Systems, Not On-Premise ERPs
There are still many small businesses using traditional on-premise licenced ERP systems. But interestingly, the SMBs who were deemed leaders – the top 35% - were largely those using cloud based ERP systems.
Cloud ERP solutions are giving those leaders numerous advantages. Cloud ERP systems typically takes less time and setup, have a lower cost of entry and typically offer more freely available support. SaaS ERPs are particularly cost effective due to their subscription based, per user fee structure.
The other advantage of cloud ERP software is that all users can access the same centralised, web accessible data. This allows better collaboration, and more accurate decisions based on real-time data
Having the one, single source of data which is accessible regardless of physical location enables staff to be working from accurate, up-to-the-minute information. Removing the need for multiple, locally kept versions of spreasheets and documents can dramatically increase data security. Negating the need for emailing documents means also reducing the information security risk.This is something we cover more in depth in our article 10 Benefits of Cloud Computing.
“By placing fewer demands on available resources, cloud ERP solutions allow SMBs to focus on more growth oriented activities,” reports Aberdeen Group.
SMB Leaders Have Mobile Access to ERP
Another factor separating leaders from followers is their use of advanced ERP features, plus their use of emerging technologies in combination with their ERP.
For example, leaders were three times more likely to have mobile access to their ERP.
This mobile access means everyone in the business can run their parts of the business from wherever they are – in the warehouse, on the road, in front of clients and so on. This in turn has a positive impact on warehouse management, order management and on the shop floor. It also means employees can make faster, more agile decisions based on up-to-the-minute data.
SMB Leaders Take Advantage of ERP Analytics
Top performing SMBs are twice as likely to have access to analytics, and it’s easy to see the correlation: ERP analytics give the ability to track progress and trends, forecast, and make better, more informed decisions.
Businesses are starting to realise the huge benefits to be gained by bringing together different types of data for more holistic analysis. For example, how your CRM data on customer industries, business types and geographical locations relates to your sales data around the product lines being ordered, quantities and peak ordering periods. Seeing the fluctuations in ordering patterns can facilitate better prediction of stock demand, help you have the right amount of stock on hand and help reduce stock obsolescence and write-offs.
More ways that leaders use ERP for SMB to their advantage
The most successful SMBs make the most of their ERP’s functionality to grow and stay ahead of the competition.
You can see some distinct gaps, as displayed in the below graph, particularly between the areas of real-time cross-department collaboration and the ability to modify an ERP in reaction to business change. The leaders here are are gaining several big advantages by making better use of these capabilities.
- Real-time visibility into data
SMB leaders are more likely to have access to real-time data and reports, allowing them to make better, more agile business decisions.
SMB leaders are more likely to use communication and collaboration functionality within their ERP, so that all teams can work more closely together, regardless of physical location. Teams also gain the advantage of working from the same source information, rather than different versions of data being kept locally or emailed around.
- Demand planning
Leaders are 30% more likely to be able to plan and forecast demand. This in turn means they can manage their inventory and staffing better, which reduces costs. This is not surprising given the correlation to leaders’ use of ERP. The business intelligence available when bringing together multiple data sets, such as CRM and sales data, can provide a big advantage when planning for stock demand fluctuations.
- Process standardisation
Leaders are more likely to use their ERP to create standardised processes for improved quality and consistency. The right ERP system can also strongly support further Business Process Improvement (BPI) methodologies to continue refining and streamlining processes. Have a read of our article on How Business Process Improvements Can Empower Growth for more ideas on this.
Successful SMBs are more likely to use flexible ERP systems which support business change. Plus, they tend to see their ERP vendor as a business partner who can help them continue to grow.
ERP systems for SMBs create measurable improvements
Businesses who use an ERP can experience clear improvements in a number of essential areas. Both top performers and lower performers gain measurable benefits from their ERP system:
Criteria for choosing a cloud ERP system for SMBs
Ready to consider an ERP? Aberdeen Group identified key criteria for an ERP that will support business growth:
- Use a scalable ERP solution: choose an ERP that supports your changing business.
- Select a flexible ERP: choose an ERP that’s flexible and adaptable. Look for a system with functionality that supports your existing business –and your future business.
- Ensure your ERP supports collaboration: go with an ERP that allows internal and external collaboration.
For some further tips on what to consider when choosing the best ERP solution for your business, have a read of our article Choosing Wholesale Distribution Small Business Software.
ERP systems for SMBs can provide a clear advantages. According to Aberdeen’s research, the top performing and successful SMBs are already using ERP to simplify complexity, make faster decisions, collaborate and standardise processes. And of those leaders, cloud based ERP solutions are most often the type of ERP being chosen.
If you’d like some more information on how cloud ERP solutions can fuel your business growth, why not start a conversation with a JCurve consultant who loves hearing about your business.